Cash Envelope System

Are you one of those people who never carry cash? Do you swipe your debit or credit card every chance you get? Is receiving your bank statements a shock every month? Well, this post could very well open your eyes and possibly change your life as it has mine!

So, you may ask, what is this “cash envelope system” I’m speaking of. I actually came across this method while trolling Pinterest in hopes of finding something I could do to change my financial situation. I hated that I was just swiping my debit card without keeping track of how much I was actually spending and keeping track of how much money was actually in the bank. Below, I will outline the basics of the cash envelope system, and show you how to get started.

The cash envelope system was created by Dave Ramsey and no, this is not a new fangled way to keep track of your money. This system has been around for quite some time.

Remember the budget I had talked about in my Budgeting 101 post? Have that handy when you begin going through these steps. This system is solely budget based, so if you don’t already have a budget put together, view the steps here.

My advice to you is if you’re not paid a set amount each week or every other week, use the low end number. Whether you don’t work a set schedule, or if you aren’t always working a full 40 hours per week, going with the lower number will prevent you from overspending or being short when you had the money next week, and don’t this pay period. This can also help you accumulate extra savings that can sit in your bank account untouched!

Once you have your budget in place, take a look at how much you are spending for each category. Totaling up each category will give you the amount of cash you need each week. After you have your finalized total, get out some plain white envelopes in which your cash will be stored. Write the name of your categories on each envelope, and you’re ready to hit the bank!

Before you head to your bank, it is best if you have your total amount written out with the number of specific bills you need. For example if you need 7 twenty dollar bills, 2 ten dollar bills, and 2 five dollar bills. Go to the teller and ask to withdrawal from your account the amount you need. He or she will ask how you would like it broken. This is the time you would tell them how you would like it as explained above.

After you receive your money, place it in the correct envelope and you’re ready to go!

This method does require some discipline, as you cannot take money from other envelopes to cover funds elsewhere. Once you run out, you run out!

Also, if you have fixed expenses, such as mortgage, credit card payments, bills, or car payments, typically you just leave those funds in your account and use your debit card to pay for those things.

If you have any questions, feel free to email me!

I hope this can help you change your life like it has mine!